Output and new orders highlight industry optimism

Latest data from the ONS provide positive signs for the construction industry going forward

DATA published by the Office for National Statistics (ONS) show that construction output in January rose 1.8% compared with December while new orders for the final quarter of 2013 rose 1.5% compared to the third quarter, providing positive signs for the industry going forward.

Commenting on the ONS figures, Dr Noble Francis, economics director at the Construction Products Association, said: ‘The construction industry continued to see a recovery in activity. Output in January was 5.4% higher than snow-affected January 2013. New orders are an early indicator of future output, so the 1.5% rise during the final quarter of 2013 suggests that the growth in activity is also likely to continue over the next 12–18 months.

‘Private housing was the key driver of construction growth in January with sector output 23.3% higher than a year earlier. New orders for private housing in the fourth quarter of 2013 rose 7.2% compared with the third quarter and indicate growth for the sector in 2014 and 2015. The Association forecasts that private housing starts will rise 16% this year and a further 10% in 2015. 

‘Output in public non-housing, which primarily covers schools and hospitals work, has suffered greatly in recent years but looks set for a recovery. Output in the sector fell 34% between 2010 and 2013. In January, however, output was 2.2% higher than a year earlier and new orders in fourth quarter were 16.8% higher than in third quarter, pointing towards sector growth this year.’

Dr Francis warned, however, that despite many government announcements of finance for large infrastructure projects over the last two years, output in the infrastructure sector fell by 2.3% in January compared with December and was 3.2% lower than a year earlier. Of greater concern, infrastructure new orders in the fourth quarter were 22.2% lower than in third quarter,’ he said.

Meanwhile, in a separate announcement, The Construction Products Association welcomed the Chancellor’s 2014 Budget Statement, which backs British manufacturers and builders.

Dr Diana Montgomery, chief executive of the Association, said: ‘Having highlighted the need for government clarity around its plans to support house building, we are pleased that the Help to Buy scheme has been extended to 2020. We have already seen this have a real impact on the ground in generating new starts, and are confident that this greater medium-term clarity will further incentivize builders.'

Dr Montgomery said the Association was also encouraged by the recognition that infrastructure is part of a successful economy, with the short-term support for projects such as guarantees for the Mersey Gateway Bridge, £140 million for damaged flood defences and £200 million for pothole repairs.

However, she said the Government must focus on delivery of its existing project pipeline and getting spades in the ground – a critical challenge given the recently disappointing ONS figures showing a drop in infrastructure output and new orders.

Dr Montgomery added that it was important to hear the Chancellor offer support to energy-intensive manufacturers with a £7 billion package, including the cap on the carbon price floor until the end of the decade, along with new compensation for the rising costs of the Renewable Obligation and the Feed-In Tariffs.